Overall, we see continued signs of stabilisation in the euro area economy, albeit still at a low level. The situation in financial markets has clearly improved in response to the ECB’s measures. The improvement is also due to the progress made by euro area governments towards accepting more binding common fiscal rules and by the progress on fiscal consolidation and economic reform in many countries...

...As far as monetary policy is concerned, growth will be supported by the very low short-term interest rates and by all the measures adopted by the ECB to foster the proper functioning of the euro area’s financial sector.

Taking the context of deeply malfunctioning credit markets, our recent decision on medium-term liquidity has been central in banks returning to play their vital role in the real economy. Banks account for over two thirds of external financing of firms in the euro area. Banks are especially important for small and medium-sized enterprises, which account for nearly three quarters of employment in the private sector.

As many as 800 banks participated in our last operation. They cover virtually the entire euro area. Many of the banks are small, regional institutions. I cannot even mention their location, the towns, the villages where these banks are, because often they would be the only bank in town so they could be identified. This tells us one thing – that the money is now closer to households and the small and medium-sized enterprises than it was before.

We are continuously alert to the risk of inflation, but this risk is not materialising at the present time. Moreover, inflation expectations remain firmly anchored in line with price stability. All the necessary tools to address potential upside risks to medium-term price stability are fully available.

Over the past 13 years, the ECB has achieved one of the best records of price stability in European history. We are committed to maintaining that record.

The recent signs of stabilisation allow us all to face the medium-term challenges for the euro area with a degree of confidence. All policy-makers should take advantage of this position to continue their reforms with confidence...

Mario Draghi on competitiveness within the euro:

...Overall, looking at competitiveness within the euro area, there have been substantial differences across countries.

Indeed, the strains in some sovereign debt markets have been compounded by the severe competitiveness differentials that have emerged within the euro area.

A convenient way to identify competitiveness differentials is simply to look at the current account balances of each country.

Current account imbalances could be justified for any country, including those participating in a monetary union, and they do not necessarily reflect a loss of competitiveness. But increasingly, larger current account deficits have resulted from significant losses of national competitiveness, signalling domestic macroeconomic imbalances and deeper structural problems. These losses of competitiveness limit the country’s growth potential and hinder its participation in the global trade integration.

Against this background, rather than financing productive investment in the tradable sector and fostering export performance, capital inflows in some countries with excessive current account deficits have fuelled asset price rises and private indebtedness. Hence, current account imbalances within the euro area should be a source of concern for policy-makers when they relate to losses of competitiveness....

Mario Draghi on the policy challenges to increase competitiveness:

...Within the euro area, a number of countries need to repair and strengthen their competitiveness for the sake of their own continued prosperity and the overall stability of our economic and monetary union. This process requires going to the root of the loss of competitiveness, tackling its sources and enhancing the opportunities for growth.

The time frame of this correction will differ according to the degree of the imbalances and countries’ overall economic conditions. But in times of severe financial constraints, there is no other choice than to address the structural losses in competitiveness in an urgent and decisive manner.

What monetary policy can do for competitiveness is to ensure price stability in the euro area, reducing risk premia and making sure that all the transmission channels of the monetary impulse do work.

I would add that the markets clearly understand that. Thus, continued price stability, unencumbered credit markets, fiscal consolidation and structural reforms that decisively address the issue of insufficient growth stemming from loss of competitiveness would bring about an increase in confidence. And, as I am sure we all understand, increased confidence will further contribute to Europe’s recovery and to our longer-term potential for growth, jobs and continued prosperity.

Overall, we see continued signs of stabilisation in the euro area economy, albeit still at a low level. The situation in financial markets has clearly improved in response to the ECB’s measures. The improvement is also due to the progress made by euro area governments towards accepting more binding common fiscal rules and by the progress on fiscal consolidation and economic reform in many countries...

...As far as monetary policy is concerned, growth will be supported by the very low short-term interest rates and by all the measures adopted by the ECB to foster the proper functioning of the euro area’s financial sector.

Taking the context of deeply malfunctioning credit markets, our recent decision on medium-term liquidity has been central in banks returning to play their vital role in the real economy. Banks account for over two thirds of external financing of firms in the euro area. Banks are especially important for small and medium-sized enterprises, which account for nearly three quarters of employment in the private sector.

As many as 800 banks participated in our last operation. They cover virtually the entire euro area. Many of the banks are small, regional institutions. I cannot even mention their location, the towns, the villages where these banks are, because often they would be the only bank in town so they could be identified. This tells us one thing – that the money is now closer to households and the small and medium-sized enterprises than it was before.

We are continuously alert to the risk of inflation, but this risk is not materialising at the present time. Moreover, inflation expectations remain firmly anchored in line with price stability. All the necessary tools to address potential upside risks to medium-term price stability are fully available.

Over the past 13 years, the ECB has achieved one of the best records of price stability in European history. We are committed to maintaining that record.

The recent signs of stabilisation allow us all to face the medium-term challenges for the euro area with a degree of confidence. All policy-makers should take advantage of this position to continue their reforms with confidence...

Mario Draghi on competitiveness within the euro:

...Overall, looking at competitiveness within the euro area, there have been substantial differences across countries.

Indeed, the strains in some sovereign debt markets have been compounded by the severe competitiveness differentials that have emerged within the euro area.

A convenient way to identify competitiveness differentials is simply to look at the current account balances of each country.

Current account imbalances could be justified for any country, including those participating in a monetary union, and they do not necessarily reflect a loss of competitiveness. But increasingly, larger current account deficits have resulted from significant losses of national competitiveness, signalling domestic macroeconomic imbalances and deeper structural problems. These losses of competitiveness limit the country’s growth potential and hinder its participation in the global trade integration.

Against this background, rather than financing productive investment in the tradable sector and fostering export performance, capital inflows in some countries with excessive current account deficits have fuelled asset price rises and private indebtedness. Hence, current account imbalances within the euro area should be a source of concern for policy-makers when they relate to losses of competitiveness....

Mario Draghi on the policy challenges to increase competitiveness:

...Within the euro area, a number of countries need to repair and strengthen their competitiveness for the sake of their own continued prosperity and the overall stability of our economic and monetary union. This process requires going to the root of the loss of competitiveness, tackling its sources and enhancing the opportunities for growth.

The time frame of this correction will differ according to the degree of the imbalances and countries’ overall economic conditions. But in times of severe financial constraints, there is no other choice than to address the structural losses in competitiveness in an urgent and decisive manner.

What monetary policy can do for competitiveness is to ensure price stability in the euro area, reducing risk premia and making sure that all the transmission channels of the monetary impulse do work.

I would add that the markets clearly understand that. Thus, continued price stability, unencumbered credit markets, fiscal consolidation and structural reforms that decisively address the issue of insufficient growth stemming from loss of competitiveness would bring about an increase in confidence. And, as I am sure we all understand, increased confidence will further contribute to Europe’s recovery and to our longer-term potential for growth, jobs and continued prosperity.